EVOLUTION IN EUROPE; Jobless to Soar in a Free-Market East, C.I.A. Says

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The Central Intelligence Agency said today that it foresaw soaring unemployment in Eastern Europe as countries there broke up state monopolies and adopted free-market economic principles.

In its first comprehensive report on the region's economic problems, the agency said that ''unemployment could easily exceed 1.5 million in Poland - 9 percent of the work force'' - by the end of this year.

Moreover, the agency said that unemployment might be in the range of 15 percent to 20 percent in Yugoslavia and East Germany and would be ''5 percent or more'' in Bulgaria and Hungary.

The total output of goods and services for Eastern Europe declined last year for the region as a whole and for every country in the region except Czechoslovakia and East Germany, the C.I.A. said in a report to Congress.

The report was prepared at the request of the Joint Economic Committee of Congress. Senator Jeff Bingaman, chairman of the panel's Subcommittee on Technology and National Security, first suggested the study. The C.I.A. has done similar reports on economic developments in the Soviet Union and China every year since 1974.

The new report is an antidote to any romantic notions about East Europe's economic future. ''Overall economic growth in the region is likely to deteriorate further in the short term,'' it said, and economic ''performance may be poorest in those countries pushing reform the hardest: Poland, Hungary and Yugoslavia.''

Indeed, it said, ''Economic performance and living standards - particularly in Poland, Romania and Bulgaria - are likely to decline in the near term.''

The agency said that the economic problems of Eastern Europe resulted, in part, from decades of Communist mismanagement. But in a curious way, it said, the Soviet Union had helped prop up the economies of Eastern Europe, and that crutch is now being taken away.

Loss of Raw Materials

As East European countries declare economic independence from Moscow, they lose the benefit of oil, coal and other raw materials sold on exceedingly favorable terms, with sizable long-term credits, the C.I.A. said.

Eastern Europe still conducts about 40 percent of its trade with the Soviet Union, and energy imports from the Soviet Union account for 25 percent of the region's total energy consumption, the report said. Looking to the future, the C.I.A. said that East European officials expect that a united Germany will replace the Soviet Union as ''the area's dominant economic partner.''

The agency warned, ''Unemployment is likely to soar if the new governments vigorously pursue plans to break up large single-enterprise state monopolies, restructure their economies away from noncompetitive heavy industries to light manufacturing and consumer-goods industries, eliminate state subisidies and let the market determine winners and losers.''

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Among the seven countries covered in its report, the C.I.A. said that standards of living were highest in East Germany and Czechoslovakia and lowest in Romania, which still suffers from the ''disastrous economic legacy'' of the dictator Nicolae Ceausescu.

The report said that economic ''reform programs and actions have advanced the furthest in Poland, Hungary and Yugoslavia.'' Changes have occurred much more slowly in Czechoslovakia and Bulgaria, with ''Romania at the back of the reform pack,'' it said.

To estimate the standard of living in a country, economists use various statistics including per capita gross national product, which measures the total output of goods and services in relation to the country's population. For the United States, per capita G.N.P. was $21,036 last year.

For Eastern Europe as a whole, per capita G.N.P. was 27 percent of the American figure. By this measure, East Germany had the highest standard of living in Eastern Europe, with 46 percent of that of the United States.

The gap between Eastern Europe and the West has widened since 1975, when its per capita output was 32 percent of that in the United States.

Senator Bingaman, a Democrat from New Mexico, said the countries of Eastern Europe faced a ''long and arduous'' struggle to achieve economic well-being. ''While nothing could be more welcome than the liberation of Eastern Europe from Communism and Soviet domination, there is simply no time to be euphoric,'' he said. ''Many countries of the region are in for a period of recession and economic crises. Things will likely get worse before they improve.''

The report, ''Eastern Europe: Long Road Ahead to Economic Well-Being,'' said that most countries in the region would get a ''peace dividend'' as they reduce their armed forces and the production of tanks and other weapons.

But the C.I.A. said the countries of Eastern Europe had only begun to grapple with an ''explosive'' issue: how to distribute the wealth accumulated by the state over the last 40 years.

Already, it said, many people in Eastern Europe complain that government-owned factories, real estate and farms are being sold swiftly, at low prices, to corrupt Communists who held senior positions in the party or the state bureaucracy.

A version of this article appears in print on May 17, 1990, on Page A00012 of the National edition with the headline: EVOLUTION IN EUROPE; Jobless to Soar in a Free-Market East, C.I.A. Says. Order Reprints|Today's Paper|Subscribe